The Canadian policy stance vis-à-vis the recession is essentially standing impatiently while US and EU policy-makers get their sh*t together
— Stephen Gordon (@stephenfgordon) June 21, 2012
June 21, 2012
Canada’s recession, in one Tweet
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June 19, 2012
EU’s Barroso spurns advice from Canadian “nobody”
The EU is not taking Prime Minister Stephen Harper’s advice gracefully. In fact, they’re not taking it at all:
Maybe it was the 35 C heat here on Mexico’s Baja Peninsula. Maybe it was the pressure of the crisis he faces back home.
Whatever it was, when I asked European Commission president Jose Manuel Barroso here Monday why Canada should risk its financial good name to bail out European banks, Barroso blew a diplomatic gasket.
“We are extremely open and we are engaging our partners but we are certainly not coming here to receive lessons from nobody,” he harrumphed.
That “nobody” is apparently our PM. How dare a mere Canadian politician offer criticism of the European Union, the greatest political achievement of mankind?
In Barroso’s eyes, the fiscal crisis in Europe is not even Europe’s fault. It is the victim in all of this. For that reason, the rest of the world ought bail it out, even though, as Prime Minister Stephen Harper has noted, the so-called euro area of 27 countries is the single largest and wealthiest economic unit in the entire world.
Harper has told Barroso just that, saying that if Canada — or anyone else — is going to kick in to a US$430 billion pool administered by the International Monetary Fund, then Europe is going to have to release the chokehold it has had on the IMF.
And of course, no negotiation with the EU is complete without some hard-to-misunderstand threats from the Eurocrats:
But Barroso wasn’t finished. In the middle of his tirade, he trotted out a thinly veiled threat that a Canada-EU free-trade deal was at risk unless Harper comes to his senses and sends Canadian cash to the continent.
“We are trying to conclude an important agreement on trade with Canada. Why? Because all the other parts of the world look at Europe as a source of possible growth for them. And, in fact, they also have an interest. The sooner the situation is stabilized in Europe, the better for them,” he said.
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Big business loves regulation: it keeps competition at bay
Jan Boucek at the Adam Smith Institute blog, with a couple of examples of big business welcoming additional government intervention in their markets:
First out of the trap was Barclays CEO Bob Diamond. In an interview Wednesday with Bloomberg, he reprised his long-standing mantra that “strong banks, like Barclays, want strong regulation.”
This sounds good in our current age of finger-pointing and bank-bashing but serves Barclays well if high barriers to entry keep out more competition from Diamond’s industry.
Then in an interview Friday with The Financial Times, the outgoing head of retail at Royal Bank of Scotland Brian Hartzer suggested regulators should forcibly end free current accounts. He smoothly phrased it in terms that chime with today’s sentiment: “Regulatory intervention might be helpful in forcing banks to the table” and “A large proportion of customers are being cross subsidised — we think that’s unfair.”
Of course, what Hartzer proposes means banks no longer having to compete on price for their most basic product.
Both these sweetly melodious proposals for more regulation need to be treated with Adam Smith’s “most scrupulous” and “most suspicious attention” because they’re music to the ears of our discordant political maestros.
The closer big business and government become, the stricter the regulations against individuals and firms trying to compete with the big businesses. Small firms are almost always disproportionally impacted by industry-wide regulations (and that’s by design), which makes them less able to compete with the established firms. Regulators are more help to big companies than clever advertising, innovative product development, or good customer relations.
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QotD: The mottos of “High Liberalism”
The story is, in a few brief mottos to stand for a rich intellectual tradition since the 1880s: Modern life is complicated, and so we need government to regulate. Government can do so well, and will not be regularly corrupted. Since markets fail very frequently the government should step in to fix them. Without a big government we cannot do certain noble things (Hoover Dam, the Interstates, NASA). Antitrust works. Businesses will exploit workers if government regulation and union contracts do not intervene. Unions got us the 40-hour week. Poor people are better off chiefly because of big government and unions. The USA was never laissez faire. Internal improvements were a good idea, and governmental from the start. Profit is not a good guide. Consumers are usually misled. Advertising is bad.
Thus Anderson: “Externalities, asymmetrical information, and other collective action problems are … pervasive in economic life. Countless ways of conducting business reap gains for some while imposing unjust costs on others. Create a cartel. Stuff rat feces in sausages.” Thus Freeman: “It is a truism to say that in order to achieve the benefits of an efficient market economy (increasing productivity, greater economic output, increasing productive capital, etc.), the basic rules of property, contract, and exchange must be structured [by government] to realize efficient market relations.”
No. The master narrative of High Liberalism is mistaken factually. Externalities do not imply that a government can do better. Publicity does better than inspectors in restraining the alleged desire of businesspeople to poison their customers. Efficiency is not the chief merit of a market economy: innovation is. Rules arose in merchant courts and Quaker fixed prices long before governments started enforcing them.
I know such replies will be met with indignation. But think it possible you may be mistaken, and that merely because an historical or economic premise is embedded in front page stories in the New York Times does not make them sound as social science. It seems to me that a political philosophy based on fairy tales about what happened in history or what humans are like is going to be less than useless. It is going to be mischievous.
Dierdre McCloskey, “Factual Free-Market Fairness”, Bleeding Heart Libertarians, 2012-06-16
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June 18, 2012
Rerun of the Greek election
The Economist summarizes the results of yesterday’s election in Greece:
WHEN deciding whether to grant citizenship to an outsider, the Ancient Greeks would put the matter to a vote, tossing coloured pebbles into a clay jar. On June 17th almost 29.7% of voting Greeks picked the colours of New Democracy, a centre-right party that broadly supports the country’s EU bail-out agreement. It was seen as a vote to remain citizens in good standing of the single currency. New Democracy narrowly beat Syriza, the “coalition of the radical left”, which was threatening to rip up the bail-out agreement. That would have resulted in ejection from the euro area or at least ostracism (another Ancient Greek practice) from its fellow members.
On the face of it, this do-over election has generated the kind of result euro-officials were hoping to see in the first election on May 6th. The leader of New Democracy, Antonis Samaras, will now seek to form a coalition with other parties that broadly support the bail-out. The Greek people can look forward to the sweat of fiscal austerity, not the tears of financial chaos. They can expect chronic misery rather than acute disaster.
[. . .]
What about the economy? As our piece last week reported, it has spent the last six weeks in suspended animation. Unfortunately, economies do not keep well in the freezer. The hesitation has wreaked great and irreparable harm. The banks have lost more deposits. The government’s arrears have grown. Erik Nielsen, chief economist of UniCredit, reports that pharmacists have suspended credit to the government, hampering the supply of medicines. The pebbles cast in May have spread damaging ripples through world markets, which have not reversed themselves. They “introduced yet another round of uncertainty” that the second bail-out programme “was not built to deal with.”
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June 17, 2012
Narrow specialization, but very wide assumed knowledge
Tim Worstall on the problem when specialists in one area pretend deep understanding of radically different areas:
Regular readers will know that I’m perfectly happy to take what the climate scientists tell me about climate science. Where I start to stray from the path of green orthodoxy is those same scientists then tell us the economics of what we ought to do about it all. Something they are not competent to comment upon as they really don’t understand the economics. I do accept the economics of climate change as laid out by the economists who have studied the economics of climate change. William Nordhaus, Nick Stern and so on, tell us that if the climate science is right then a simple revenue neutral carbon tax will be the solution.
That’s fine by me. But it does still puzzle me as to why the not economists feel competent to pronounce on the economics of climate change. Are they intellectual supermen who can master two widely different subjects? Simply succumbing to politics: something must be done, this is something, do this? [. . .]
Which leads us to our conclusion. The reason the scientists are so in conflict with what the economists of climate change are saying about the economics of climate change is simply that the scientists are entirely ignorant of what the economists are saying. And I’m afraid that, despite the popularity of the stance among politicians, ignorance is not a notably successful form of governance.
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June 15, 2012
The horrific environmental scourge of the plastic bag
Terence Corcoran on Toronto City Council’s most recent brainfart — banning plastic bags — and the actual environmental impact of same:
Meantime, most Canadians, through the media, would be relying on green activists and demagogic politicians who have been promoting plastic bags as a local and national environmental scourge for more than a decade. There’s not enough space here to review the mindset of politicians, including the inhabitants of Toronto city council, who last week voted 27-17 to ban plastic bags by 2013. Most of the bylaw’s backers would be getting their information from professionals, including Dr. Rick Smith, head of Environmental Defense.
[. . .]
Canadians who answer polls should know that Mr. Smith holds a PhD in green bull. He said Canadians know at a “gut level” that plastic bags are a “not terribly complicated environmental issue.” Well, here are three complications:
Litter The last city of Toronto audit of litter across the city, in 2006, found six plastic bags out of 4,341 items. That’s 0.14% by item. By weight, the percentage would be less.
Waste The 450 million plastic bags Mr. Smith mentions is a 2008 number. The city says the current number of bags is now estimated at about 215 million (the science of calculating this is something else). But even the 450 million-bag total, at about six grams per bag, works out to 2,600 tonnes. As a percentage of the city’s estimated 800,000 tonnes of waste, plastic bags would account for 0.3%. If all plastic bags were eliminated — an impossibility given their necessity as garbage-bin liners and other uses — Toronto’s waste stream would be essentially unchanged. Not a penny will be saved, and costs would likely go up under complications brought on by the ban.
Environment Numerous comprehensive studies by people who are as green or greener than Mr. Smith suggest plastic bags are better than the alternatives — whether paper or cloth. Plastic is less polluting and toxic than paper and cotton, according to a 2011 U.K. Environment Agency report. As for global warming, a cloth bag would have to be reused 327 times, and a paper bag nine times, to match the low warming impact of a high-density polyethylene bag that’s reused as a garbage-bin liner.
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June 13, 2012
“… there simply aren’t enough lifeboats!”
Nigel Farage speaking in the European Parliament:
Another one bites the dust. Country number four, Spain, gets bailed out and we all of course know that it won’t be the last. Though I wondered over the weekend whether perhaps I was missing something, because when the Spanish prime minister Mr Rajoy got up, he said that this bailout shows what a success the eurozone has been.
And I thought, well, having listened to him over the previous couple of weeks telling us that there would not be a bailout, I got the feeling after all his twists and turns he’s just about the most incompetent leader in the whole of Europe, and that’s saying something, because there is pretty stiff competition.
Indeed, every single prediction of yours, Mr Barroso, has been wrong, and dear old Herman Van Rompuy, well he’s done a runner hasn’t he. Because the last time he was here, he told us we had turned the corner, that the euro crisis was over and he hasn’t bothered to come back and see us.
I remember being here ten years ago, hearing the launch of the Lisbon Agenda. We were told that with the euro, by 2010 we would have full employment and indeed that Europe would be the competitive and dynamic powerhouse of the world. By any objective criteria the Euro has failed, and in fact there is a looming, impending disaster.
You know, this deal makes things worse not better. A hundred billion [euro] is put up for the Spanish banking system, and 20 per cent of that money has to come from Italy. And under the deal the Italians have to lend to the Spanish banks at 3 per cent but to get that money they have to borrow on the markets at 7 per cent. It’s genius isn’t it. It really is brilliant.
So what we are doing with this package is we are actually driving countries like Italy towards needing to be bailed out themselves.
In addition to that, we put a further 10 per cent on Spanish national debt and I tell you, any banking analyst will tell you, 100 billion does not solve the Spanish banking problem, it would need to be more like 400 billion.
And with Greece teetering on the edge of Euro withdrawal, the real elephant in the room is that once Greece leaves, the ECB, the European Central Bank is bust. It’s gone.
It has 444 billion euros worth of exposure to the bailed-out countries and to rectify that you’ll need to have a cash call from Ireland, Spain, Portugal, Greece and Italy. You couldn’t make it up could you! It is total and utter failure. This ship, the euro Titanic has now hit the iceberg and sadly there simply aren’t enough life boats.
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QotD: “California is becoming Detroit”
The liberal model — borrowing huge sums, rigging interest and the currency to enable state profligacy, turning large swaths of the population into less productive unionized government workers or dependents on the dole who vote in thanks to political hacks — simply does not work. How could beautiful blue-state California lose almost a million refugees to arid Texas? I like Texas, but Dallas had far less of nature to work with than did San Francisco. (It takes a lot of human failure for thousands to give up verdant California to move to Utah or the Nevada desert.) What we are witnessing is nothing short of surreal: in the manner that Tijuana was a different universe from San Diego, so too the entire state of California is becoming a different world from its neighbors. Whether one examines its near dead-last schools, its oppressive income and sales taxes, its decaying roads and infrastructure, its absurd prison system, its dysfunctional state offices (try the DMV), or its priestly public employee caste, California is becoming Detroit.
Victor Davis Hanson, “The Liberal Super Nova”, PJ Media, 2012-06-11
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June 11, 2012
An epitaph for the original Arts and Crafts movement
Colby Cosh has an interesting slant on William Morris and the original Arts and Crafts movement (for the record, I’m quite a fan of a lot of A&C artifacts, if not quite so much of their philosophy):
In the 19th century, William Morris preached a social revolution in which exploitative “useless toil” would be replaced by “useful work”. He dreamt of a world that would reject shoddy mass-produced goods in favour of objects made with care and craftsmanship. Any business that sells “artisanal” goods, whether the goods be curtains or crumpets, is essentially quoting Morris and referring to his promise.
That promise, of course, failed spectacularly. It did not even survive Morris’s own time. His “libertarian socialism” of crafted objects and honest work found itself drowned out at every turn by leftist alternatives which, more sensibly, accepted the power and inevitability of mass production. 20th-century Marxism wasn’t opposed to factories; it worshipped them, fetishized them. The fatal problem with Morris’s appeal is that he was just plain wrong about mass-produced objects necessarily being unlovely junk. We have been to Ikea; we know better.
Morris felt very strongly about this, and from his own historical standpoint, he was certainly on to something. It’s impossible for us to imagine what kind of things factories suppurated into the marketplace before things like statistical control charts were invented, or before items like micrometers were themselves mass-produced to a consistent high standard. Morris lived in a world where individual masons and cabinetmakers and weavers really were losing their livelihoods to a tide of undifferentiated, undistinguished banality; his feelings of alarm now seem fussy when we read him, but that is because only the better-made Victorian objects have physically survived destruction or disposal and reached our time.
Soon enough, however, the art of industrial design would come to the rescue. If Morris could have lived long enough to see the Studebaker Commander or the IBM Selectric II or, yes, the furshlugginer iPhone, he would have packed in the Arts and Crafts talk and gone straight to work designing pickle-jar labels. (Morris was not too consistent when it came to the ultimate logical consequences of a world made by hand, anyway. The influential Kelmscott Press he founded in 1891 favoured early printing techniques and letterforms, but it was, at any rate, a press; unlike his spiritual ancestor William Blake, he didn’t set out to mimic the appearance of illuminated manuscripts by the actual method implied in the etymology of the term “manuscript”.)
While I picked this section of the article to quote, you really should read the whole thing. It’s some of the most thought-provoking writing I’ve seen in months.
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We can’t “save” capitalism, because we don’t “have” capitalism
James Delingpole in the Telegraph (the italicized opening paragraph is a quite from Tim Morgan):
Reforming capitalism so that it serves the majority, and strengthening the individual against the collectivist and the corporate, are inspiring visions. This is where government should be taking Britain.
Easier said than done, of course — as I was reminded yesterday when I Tweeted it under the headline “How to rescue capitalism….” only to have some Twentysomething smartarse Tweet back “Rescue it? Bury it!”
This is the kind of fifth-form, sub-Banksy political analysis which passes for conventional wisdom these days. It’s the dominant strain of thinking at the Guardian, at the BBC, among the studio audience at Channel 4’s apocalyptically lame 10 O’Clock Live, on Twitter, in the right-on brains of groovester opinion-formers all the way from Ben Goldacre to Graham Linehan to Polly Toynbee — and, of course, across the world in the entire Occupy movement. Capitalism, they all maintain, has failed.
No, capitalism has not recently been tried: that’s the real problem. And what I particularly like about Morgan’s report — well worth reading in full — is that it addresses this extremely important point. What we’re experiencing around the world at the moment is not laissez-faire, self-correcting, authentic, free-market capitalism but an excedingly corrupt and bastardised form thereof.
What we’re seeing is a grotesque stitch up between the banking class, the corporate class and the political class — at the expense of the rest of us.
One day, I like to hope, those of us on the libertarian right will find common cause with (at least some of) the Occupy crowd and unite against our real enemy.
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June 9, 2012
QotD: Counteracting those irritating “nudgers”
In the wake of Mayor Bloomberg’s proposes big soda ban, I have some suggestions for paternalistic nudges for economists who advocate such paternalism. One idea is when they go to a restaurant, by default they should be seated at the table that places them in the most proximity to people near the median income level. Or when they turn on their TVs, have them by default turn to awful TV shows popular with the median household, like America’s Got Talent, Dancing with the Stars, or some poorly written show about cops. Of course they will need a nudge so that when they rent an apartment or house it comes by default with a TV and cable. Perhaps if we want to escalate from nudge to shove, we could have them signed up to teach one class a semester at a local community college or technical school, so they get exposure to students much closer to the median ability and future income level than they’ll find at the top departments they normally teach at. They can opt out of this, of course, but have them enrolled to teach as a default upon completing their doctorates.
You see, paternalists clearly have a problem with reasoning from their own preferences, and so giving them exposure to the median consumer might help them learn valuable lessons. Paternalist economists, it seems, simply cannot imagine how a “nudge” or a “shove” like buying only 16 ounce sodas or smaller would be any kind of inconvenience to someone. What they don’t understand is that as Ivy League economists with IQs north of 140 their preferences tend to be very far from the median consumer’s, so it should be no surprise that they can’t imagine it being an inconvenience. After all, they also probably can’t imagine wanting to drink a lot of soda in the first place. In the same way, the median consumer probably could not imagine letting their kid not eat birthday cake. So from the start they should be aware that their imaginations and preferences aren’t useful guides
Adam Ozimek, “Nudges for Paternalist Economists”, Forbes, 2012-06-05
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June 8, 2012
The only two political classes that matter
James Miller in the National Post:
Nineteenth century political theorist and former U.S. congressman John C. Calhoun once wrote, “…the necessary result, then, of the unequal fiscal action of the government is to divide the community into two great classes… to divide it into tax-payers and tax-consumers.”
Throughout history, this is precisely how the dynamic between government and the people has played out. Politicians make careers out of redistributing wealth. Persistent inflation and the running up of public debt have proven that governments are incapable of spending within their means. Retaining elected office hinges too much upon buying votes.
With the post-war boom years came increasing amounts of tax revenues. This was all too enticing for politicians to pass up. Entitlement programs were created to ensure a steady supply of votes. Mr. Moore is correct in alleging that younger generations were thrown to the wolves for these promised benefits as they had no say in the matter and are now forced to foot the bill.
At the same time, millennials themselves have been fooled through years of pervasive government and nanny-state decrees into not only expecting entitlements but also misunderstanding the value of prudence. Living standards only rise when the majority of the public produces more than it consumes. This age-old lesson has been slowly forgotten with years of the expansionary welfare state and popular economic theories which favour consumption. When youth are made to believe the most important rule in all economics is “in the long run we are all dead,” is it any surprise when financial discretion takes a back seat to overindulgence?
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